Nay Pyi Taw’s hotel conundrum

After an extensive building binge, as the jubilation of hosting two major regional events subsides the government is seriously assessing how best to attract people to Nay Pyi Taw’s hotels. As the city’s 10-year anniversary approaches, it remains disconnected from the world. The question is becoming ever more critical – what next?

A jaywalker dares to cross a Nay Pyi Taw road. The city is known for its impressive infrastructure, and less appreciated for its cultural highlights. Photo: Thiri Lu / The Myanmar Times

“There has to be a two-track approach to solving the Nay Pyi Taw problem and it’s a very, very big problem, let’s not kid ourselves,” said Magnus Bartlett, chair of Odyssey Publications, which is working with the Ministry of Hotels and Tourism (MoHT) on a campaign to promote the city as a destination for meetings, incentives, conferences and exhibitions (MICE).

“We’ve got to be visionary but at the same time we’ve got to have a fast-track short-term plan, if the government wants a capital city that is taken seriously around the world,” he said.

Hotel construction has been one of the city’s major industries over the past few years. Local companies were asked to build accommodation at top speed in three specially designated hotel zones in preparation for the 2013 Southeast Asian (SEA) Games and the 2014 Asean chairship.

As a result, the number of hotel rooms more than doubled, from 2111 in 33 hotels at the end of 2012 to more than 5000 rooms in 62 hotels as of mid-June, according to MoHT deputy director U Hlaing Oo.

But due to the speed of construction – the government deadlines for completion were non-negotiable – many of the lower-grade hotels are shoddily built. Although no comprehensive data is available, average occupancy rates range from 43 percent at Kempinski Hotel to below 20pc elsewhere. To exacerbate the problem, almost 30 more hotels are under construction, according to MoHT sources.

“Nay Pyi Taw is a very challenging market. Anybody who thinks differently is very naive. It’s a very tough place to do business. If you’re in for the short term you very much should consider being somewhere else,” said William Costley, vice president of operations for Southeast Asia at Hilton Worldwide, which opened a Nay Pyi Taw hotel in October last year.

International operators in Nay Pyi Taw such as Accor, Hilton and Kempinski have not invested their own capital into the hotels and have less to lose from low occupancy rates. However, local owners, who invested equity in the projects, have lost out and will continue to do so. “Hotels in Nay Pyi Taw are not money well spent,” said Curtis S Chin, former US ambassador to the Asian Development Bank.

Like the roads and ministry buildings in Nay Pyi Taw, many hotels were built by local conglomerates at the request of the government, in return for concessions that included vehicle import licences and land elsewhere in the country.

Owners now use their properties to entertain ministers and businesspeople, as well as to host the occasional conference, according to expatriates in Nay Pyi Taw. Aside from this, many of the hotels are at times largely empty. But this shouldn’t be the case, said Franck Droin, general manager of the Kempinski Hotel Nay Pyi Taw.

“We need to show people what there is here. If people haven’t seen something, they won’t know that they want it. Nay Pyi Taw is the centre of Myanmar and there are many places around here to visit. This city is perfect for the curious traveller,” he said. “It is interesting in this regard. It was built in secret. It has a park in the shape of Myanmar, a safari and a gems museum. It can be used as a base for day trips, as it is just a four-hour drive from Bagan and Mandalay.”

Protected areas around Bagan and Inle Lake should not be overloaded with hotels, he said. “It’s important to consider the footprint and consider the options for sustainable tourism before it’s too late,” he said.

However, others believe the dream of Nay Pyi Taw as a tourist destination is farfetched due to how the city is perceived overseas. “I created a two-day itinerary for Nay Pyi Taw, when I was a product manager for Tour Mandalay, and a US client said my proposal had discredited our company in their eyes. They said that this is not a destination for leisure tourists. I think nothing has really changed since then,” said hospitality and tourism manager Marek Lenarcik.

While the government is considering promoting domestic tourism and has opened parliament to visitors, its primary focus is on developing Nay Pyi Taw as an international conference destination, through a campaign entitled “MICE is NICE”.

Business tourism

“Making this city a MICE destination is the right thing. It is the youngest capital in the world. It has sufficient facilities and infrastructure,” said Daw Khaing Mee Mee Htun, director of international and regional cooperation development at the MoHT.

The ministry, in collaboration with several parties, is developing a website called Travel Nay Pyi Taw, which will include an events directory in 20 languages, and will allow companies to send enquiries directly to the hotels and conference centres. “I have been suggesting that we hold events like Formula One sports tournaments, tennis, golf and music concerts, as we have great stadiums here in Nay Pyi Taw,” said Steven Htut, who is building the website.

The MoHT should work with five or six other ministries, including the Ministry of Transport, to realise the importance to the capital of a vibrant business travel industry, said Mr Bartlett.

However, some are cautious about Nay Pyi Taw’s potential as a MICE destination, as they believe it will involve too much government intervention. Earlier this month, Sphere Conferences held a forum on hotels and tourism that was moved to Nay Pyi Taw at the request of the MoHT.

“The Union minister this morning welcomed you all, but why are you here? Well actually because he intervened and said the conference should be here and not in Yangon,” said Mr Chin, during a speech. “If they want you to have a meeting here, you will, but this is not how business should happen. To me, Nay Pyi Taw is an example of a market driven by the government and not by business projections.”

Even during the SEA Games, one of the two occasions in which hotels were supposedly fully booked, the Ministry of Sports bought all the rooms, according to a businessperson who attended the event. “No one could book rooms directly or choose which hotel they stayed in. It all had to go through the ministry, which allocated rooms. My hotel was 40pc empty,” he said.

Another challenge to developing the city as a MICE destination is a lack of developed supply chains. Hotel chefs said that they have waited for months at a time for deliveries of tomatoes, cream, cheese and meat. Many bring their own supplies by car from Yangon.

The head chef at a major hotel said that he has resorted to buying his own pigs. “We are out of cream and have been told it will come, but not for two months,” he said. The owner of a Yangon restaurant said he opened a Nay Pyi Taw branch but had to close it due to problems with obtaining regular supplies.

A tough road to follow

To begin to attract people to Nay Pyi Taw, the most important thing is to develop transport routes, said hotels and tourism minister U Htay Aung, during the conference last week.

“We have to relax regulations. Nay Pyi Taw International Airport at the moment is just a name,” he said. “We need to incentivise airlines to come, [by removing] navigation fees and landing fees. We are very lucky to receive Bangkok Airways, but they are worried about return passengers. Also if it becomes easier to get here by bus or train that will be very helpful to get volumes. More people equals more positive feedback,” he said.

Bangkok Airways operates the only international flight to Nay Pyi Taw, which runs five times a week from Thailand’s capital. Relatively few domestic airlines fly to Nay Pyi Taw – Serge Pun’s FMI Air Charter provides the most frequent service, but charges high rates of around US$320 for a return flight. APEX Airlines flies once a day and Asian Wings flies four times a week from Yangon.

Expensive flights are a disincentive to hold events in Nay Pyi Taw, said a Yangon-based businessperson. “We hold our corporate events in Ngwe Saung [a beach in Myanmar’s Ayeyarwady Region]. I wouldn’t fly my whole team up here for $320 a head,” he said.

Encouraging low-cost airlines to operate flights to Nay Pyi Taw is a challenge, said Mr Bartlett. “I talk to the airlines and they’re not interested in even considering coming here. They say, bring us the traffic and then we will come,” he said. Low cost carrier AirAsia stopped its service to Nay Pyi Taw due to low demand.

As a result of so few flights, Asia World Company’s subsidiary Pioneer Aerodrome Services, which operates the airport, has not made a profit since it opened in 2011. Asia World repeatedly advised the government to abandon the project, even while it was being built, according to research firm Thura Swiss. Local media reports have said it has since asked the Department of Civil Aviation to take back the airport, to prevent the company from suffering severe financial losses.

To reach the capital, tourists and businessmen have few other options. The train from Yangon takes 10 hours. The motorway connecting Nay Pyi Taw with Yangon and Mandalay is known as the ‘Death Highway’ due to the number of fatal accidents since it opened in 2009.

The Ministry of Construction has called a tender to upgrade the road, and plans to police it better, but in the meantime the motorway continues to be shared by cattle, motorbikes, farm vehicles and the occasional pedestrian.

Traffic jams are not usually a problem in Nay Pyi Taw. Photo: Thiri Lu / The Myanmar Times

Draining funds

Even if the transport systems and supply chains are improved, to attract visitors, Nay Pyi Taw needs a unique selling point, said Mr Bartlett.

“The problem is that our corporate friends enjoy atmosphere,” added Thomas Kyaw Min Htin, executive committee member of the Myanmar Tourism Federation. “They say, hey, your city is like a resort, but we have nothing to do at night, no music, bar, nightlife. Of course there are shopping places, but not for foreign visitors,” he said.

However, building new facilities and launching a marketing campaign will require yet more spending, said Mr Chin. “For Nay Pyi Taw to become a business or leisure tourist destination it will require significant investment, and the government has many projects more important than this,” he said.

Even U Htay Aung expressed some doubt about the practicality of the MICE project. “Are we already committed to developing [the city] as a tourism destination? If yes, we can do everything, but there are many obstacles,” he said, during the conference in Nay Pyi Taw.

Nay Pyi Taw has already been a huge burden on the country’s budget. Although the total cost is not public information ,estimates suggest it was built at a cost of US$4bn, and while much of this was shouldered by the private sector, the public sector budget also took a hit.

“Instead of injecting revenues into programs that would benefit the country… the government squandered the money to build up Nay Pyi Taw, much of which is already crumbling,” wrote Shari Villarosa, chargé d’affaires for the US Embassy in Myanmar, according to a cable from 2007 leaked by Wikileaks.

Today, the spending continues. In February, MP U Myat Nyarna Soe told the Amyotha Hluttaw that money invested in Nay Pyi Taw’s “giant road network” and other infrastructure was being wasted. “This aggressive development should stop,” he said, adding that it had also fuelled conflict over land.

He said the low number of visitors to the capital showed that it was not a tourist destination, while industry was also unviable because it was too far from a major port. “Nay Pyi Taw is neither a commercial city nor a manufacturing [centre]. It’s just an administrative capital,” he said, as reported by The Myanmar Times.

The annual budget for Nay Pyi Taw, directly controlled by the president, has been a matter of heated debate in parliament, as it remains much higher than budgets for the other states and regions.

Lateral thinking

To attract people to the city while avoiding another round of needless spending, the government needs to think differently, according to commentators, and consider how best to use the existing facilities. Once the projects under construction are complete, the city will have more than 90 hotels.

“I have no idea why they didn’t design the SEA Games accommodation to be transformable into student housing and open a university there or a civil service training school once the need had passed, rather than force the construction of all these hotels by now-disgruntled construction companies,” said a Yangon-based businessperson.

Mr Chin pointed out that in other countries, facilities built for large events are often rethought afterward. “In London, for example, affordable housing has been built on the Olympic Games site. But here, at the moment, there is no plan to turn Nay Pyi Taw’s hotels into anything other than hotels,” he said.

Some at the conference said they believe that Nay Pyi Taw would make a good vocational training centre for young people. Daw Khaing Mee Mee Htun said that the MoHT was taking the lead on this, and that there is an idea to host students from around the country.

Due to a lack of vocational training schools, the hotels currently train their own staff, many of which have never worked in the hotel industry before. “In the beginning the workers were not so interested, but now they are and they love to work – the passion has increased a lot,” said Tun Tun Naing, assistant manager at the Kempinski Hotel in Nay Pyi Taw.

“The hotels are very good for developing people. There’s a fantastic attitude, but you can only grow as fast as you have talent,” said Mr Droin.

However, others such as Mr Bartlett have even bigger visions for attracting people to the city. “To me it isn’t a hopeless case. We could turn this into the greatest campus city in the world. Why don’t we bring the universities here – Chinese, Indian, French, German, Australian. There’s the room and there’s the quality of life here,” he said.

He also suggested developing Nay Pyi Taw as a centre for pan-Asian conflict resolution, or running an international competition for urban planners.

“If we don’t do something very dramatic and different, I don’t think it’s ever going to work. But if that vision is there and the young people here can see that, then I think something very exciting could happen here,” he said.